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TCW Energy Group 4 Trends in the E&P Markets After a period of debt reduction and share buybacks, E&P companies are spending more of free cash flow on drilling Public and private valuations are up Volumetric Production Payments are back Substantial private capital flowing into industry Public venture markets are active: AIM, Canadian Jrs. Seller’s expectations are forcing buyers to bid aggressively for assets “Land rush” in unconventional gas plays Equity markets are rewarding predictable and visible reserve and production growth Clear winners: “Resource Plays”

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TCW Energy Group 5 Implications….. Market environment has created a windfall for many Hedging is necessary to support valuations and acquisition prices Value creation going forward likely to be based more on field enhancement/drill bit than market timing/arbitrage Companies have been afforded the opportunity to innovate (improved completion methods) Access to/Quality of services is key concern Large independents re-positioning their asset profile with a focus on long-lived reserves and low risk drilling Capital providers forced to be flexible Non-traditional financing sources tend to “loosen” market discipline and exit when times get tough High commodity prices can mask underlying problems – “point of caution”

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TCW Energy Group 9 Mezzanine Debt Applications Fills void in capital structure between equity and senior debt Small to mid-sized companies that cannot access the public markets Isolate assets in a separate non-recourse project financing Accelerate development drilling program Acquisition, monetization, or recapitalization Reduces the amount of equity required, thereby increasing the leverage and ultimately the equity returns Mezzanine Debt is a viable alternative when designing the optimal capital structure

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TCW Energy Group 13 TCW Overview Established in 1971 The TCW Group, Inc. is an indirect subsidiary of Société Générale, S.A. Approximately $123 billion committed or under management as of December 31, 2005 Over 1,625 institutional and private clients Staff of over 600 individuals, including over 355 professionals Offices: TCWSG Asset Management Los AngelesParis New YorkLondon HoustonTokyo Singapore Hong Kong

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TCW Energy Group 14 Conclusions Producers have choices when choosing a capital provider – Stability and partnership orientation are key TCW is bullish on prices long term New pricing environment, combined with hedging, has created new opportunities Consolidation should continue as companies utilize excess cash flow and access private equity Market appears to have accepted new higher levels for commodity prices Mezzanine capital will continue to be a viable alternative